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TMI Blog2015 (1) TMI 598X X X X Extracts X X X X X X X X Extracts X X X X ..... gister can be dispensed with else not. - Decided against assessee. Considering the entire conspectus of the case including the comparables cases relied upon by the assessee as well as the decisions of Tribunal in the case of Suresh Jindal Prop. (2015 (1) TMI 618 - ITAT DELHI), we are of the opinion that it would serve the interest of justice if the GP rate of the assesee is taken at 3.53% as was in the case of Suresh Jindal Prop. - Decided partly in favour of assessee. - ITA No. 290/Del/2011 - - - Dated:- 9-1-2015 - Shri S. V. Mehrotra And Shri George George K,JJ. For the Appellant : Shri Rohit Jain, Advocate For the Respondent : Shri J.P. Chandrakar, Sr. DR ORDER Per S. V. Mehrotra, Accountant Member This appeal at the instance of the assessee is directed against CIT(A) order dated 12.11.1010. The relevant assessment year is 2007-08. 2. Brief facts of the case are that during the year under consideration the assessee firm derived income from Timber business. It had filed its return of income declaring total income of ₹ 52,745/-. The AO rejected the assessee s books of account and computed the profits by applying the rate of 4.90% on the tu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examined the books of account and sale and purchase vouchers and noted that there was no narration of quality of timber on the sale vouchers, whereas, the assessee had purchased the timber at different rates according to quality of timber. He noted that almost all the purchases were from Singapore except few local purchases. He noted that assessee simply quoted imported timber in the column of particulars of timer sold in-stead of quoting the kind/type of timber item wise on the sale vouchers. The AO further observed that when purchase vouchers were tallied with the sale vouchers, it was noticed that true picture of gross profit was not reflected. He further observed that no itemwise stock register had been maintained by the assessee. The AO examined five bill vouchers for sale and purchase for each month and concluded that it was not possible to ascertain which exact /kind of timber had been sold against the different type/kind of timber purchased by the assessee at different rates. He show caused the assessee, vide notice dated 27th November, 2009 which has been reproduced from page 3 to 7 of his order in which he, inter alia, required the assessee to prepare the itemwise trad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ination of the citus of sale and the party thereof alongwith the tax so charged and levied. 6. The reply has been reproduced at page 8 and 9 of the asstt. Order. The AO observed that the reply received from the assessee was not in accordance with the queries specifically made with regard to the purchases of different type of timber as reflected in the table given in the show cause notice dated 27.11.2009 under which it was requested to specify the name and address of the customer to whom the assessee had sold the particular type of timber alongwith the item wise specification of quality / kind of timber. The AO has demonstrated that in the absence of evidence to tally the purchase with sales quantity wise , quality wise and sale wise, the true and correct picture of profit earned by the assessee could not be determined. He further pointed out that assessee was not maintaining stock register itemwise which is also a part and parcel of the books of account and play a major role in deducing the true and correct picture of the gross profit. He further pointed out that there was no evidence of record and document to verify the basis of the valuation of the closing stock shown by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain for want of maintenance of quality wise/item wise stock register. As discussed above, that the AO asked the appellant during assessment proceedings to file item wise/quality wise trading account of the timber dealt with and also of the separate trading account of the High sea sales, which were not filed. 1.09 In view of the facts discussed above, it is held that trading results declared by the appellant are not verifiable and hence rejection thereof by the AO is hereby confirmed. The AO further estimated the GP @ 4.9% on the basis of average GP declared by three firms which was specified in the order by the AO. Since no submission has been made by the appellant in this regard, no interference is called for in the order of the AO and the addition made by him on this account is hereby confirmed. 8. Ld. Counsel for the assessee submitted that keeping in view the nature of assessee s business, it was impractical to maintain the quantitative details. He pointed out that imported stock are cut and processed into various sizes and shapes and, therefore, it is not possible to maintain the stock register. He referred to page 8 and 9 wherein assessee s reply is contained. Ld. Counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in purchase invoices. This timber was cut into with different sizes which were also as per the specifications and, therefore, there was no impractibility for maintain the stock register of the cut timber also. When the timber was sold then also it is always sold as per the quality and, therefore, there cannot be any difficulty in linking the purchase and sales of timber. As per the tax audit report the auditors are required to certify the quantitative details and in the absence of the same a qualification is required in the tax audit report. This clearly shows the importance of stock register to be maintained by the assessee. The assessee has merely made a bald submission that it was impractical to maintain the stock register but, as demonstrated earlier, we do not find any impractability on the part of the assesee to maintain the stock register. Section 145 deals with the method of accounting followed by the assessee. As per sub section 3 of section 145, if the AO is not satisfied about the correctness and completeness of the accounts of the assessee then it can make the assessment in the manner provided u/s 144. Section 44AA requires a person, interalia, carrying on business to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. Ground No. 2, 4, 5 primarily assail the finding of the AO in applying the rate of 4.90%. In the year under consideration the GP rate was 1.97% as compared to 2.8% for asstt. Year 2006-07. The assessee s contention is that slight decline in GP margin in the asstt. Year under consideration was on account of increased cost of freight incurred by the assessee on transfer of goods from branch office in Gandhidham to Head Office amounting to ₹ 14,83,350/-. The submission of Ld. Counsel is that this amount was not a direct expenditure incurred in relation to purchase of goods but was erroneously debited to trading account which in turn resulted in decline in the gross profit margin of the assessee. He pointed out that on excluding this freight-out cost from the trading account of the assessee, the re-casted gross profit rates works out to 3.21%. Ld. Counsel further pointed out in asstt. Year 2008-09 the GP rate declared by the assessee was 2.43% which was accepted u/s 143(3) of the Act. Further in asttt. Year 2009-10 the GP rate declared was 2.76%. The AO made addition of ₹ 6 lacs and thus the GP rate works out to 3%. He pointed out that assessee has not challenged this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year under appeal is 2007-08. The comparable cases of other assessees are for AY 2004-05 to 2007- 08. If we take the comparable cases of AY 2007-08, then we find that the GP rate for the comparable cases quoted by the Assessing Officer himself is 3.53% whereas in the case of the assessee, the GP rate is 3.63%. If we compare the trading result of the year under consideration as compared to earlier year in assessee s own case, we find that in AY 2006-07, the GP rate was 2.65% which is accepted by the Revenue in the order passed under Section 143(3) wherein the Assessing Officer held as under:- Purchases and sales shown have been verified from the books of account. During the course of asstt. proceedings it was noticed that the assessee had shown gross turnover of ₹ 58871050/- and G.P. of ₹ 1560090/- and G.P. rate of 2.65% against gross turnover of ₹ 73194816/-, G.P. of ₹ 1737528/- and G.P. rate of 2.37% of immediately preceding year. The G.P. rate is on higher side, whereas gross profit rate in this line of trade shown 2.85% in the case of M/s Janta Timber Store, Timber Market, Karnal. 11. From the above, it is evident that the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard has to be given to the G.P. rate adopted in same line of business for same assessment year. The G.P. rate in the case of Sat Paul Sons (supra) has been taken at 3.53%. The AO has considered the case of Sat Paul sons as one of the comparable cases and we find that in the similar line of business the G.P. rate accepted by the Tribunal in the case of Krishan Kumar is 3.61% and in the case of Jai Parkash 3.63%. Therefore, considering all comparable cases, we are of the opinion that it would serve the interest of justice if the G.P. rate of 3.53% is adopted in the case of the assessee as was in the case of Sat Paul Sons. We order accordingly. 4.4. In the result, both the appeals, filed by the assessee as well as the Revenue are partly allowed. We find that AO has taken the same comparables into consideration which has been reproduced earlier. Thus, the facts in the present case are similar to that obtaining in Suresh Jindal s case. Therefore, considering the entire conspectus of the case including the comparables cases relied upon by the assessee as well as the decisions of Tribunal in the case of Suresh Jindal Prop. (supra), we are of the opinion that it would serve t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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